Question: You have the following data. What is the ROE difference between Firm L and Firm U, in order words, ROE L - ROE U =

You have the following data. What is the ROE difference between Firm L and Firm U,

in order words, ROEL - ROEU = ?

Firm U

Capital : $30000

EBIT : $8652

Tax rate = 25%

Equity : $30000

Debt : $0

Firm L

Capital : $30000

EBIT : $8652

Tax rate = 25%

Equity : $17088

Debt : $3289

Rd (interest rate): 8%

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